Tax season is here which means it’s time to start thinking about filing your 2023 taxes. Before you start, we’re here to make sure you’re up to date on some of the significant changes that have happened over the past year that could affect your tax return.
In this article, we’re going to provide you with a list of a few things that have changed and a few things that are carrying over from the previous tax season.
Are you an owner-operator that needs help with your 2023 taxes? Click here!
Here’s a list of a few recent congressional acts and their tax implications affecting your 2023 taxes:
The Taxpayer Certainty and Disaster Relief Act of 2020 - Ends for 2023
This act initially allowed for a 100% Per Diem deduction only if the food was purchased from a restaurant for 2021 and 2022. However, the IRS changed this rule and announced that for 2021 and 2022, all Per Diem is able to be deducted at 100% regardless of if the food was purchased from a restaurant or not. And this applies to both self-employed CDL drivers, and ride-alongs, if those ride-alongs have a business purpose. Beginning 1/1/2023 the Per Diem allowance returns to the normal 80% rate.
The Inflation Reduction Act
The Inflation Reduction Act was signed into law on August 16, 2022, and still applies in 2023. To the average self-employed truck driver, this act in many ways will have little to no effect on the way you conduct your business currently. However, it does provide new opportunities for tax savings and things to watch out for over the next 10 years.
Climate-Related Tax Credits
The Inflation Reduction Act provides roughly $369 billion in incentives for energy and climate-related programs. Many of the incentives will be seen in the form of tax credits. If a trucker or fleet has been on the fence about purchasing electric vehicles, these tax credits could push them to do so. However, does this mean you should go out and purchase an electric vehicle solely for the tax credit? Not necessarily. If you are considering a purchase of an electric tractor be sure to get all the facts first.
Health Insurance and Care
The Inflation Reduction Act will extend some of the subsidies brought on by the Affordable Care Act. Specifically, it extends the subsidies for health insurance premiums available through the federal marketplace or exchange. These subsidies had been set to expire in 2023 but the Inflation Reduction Act has extended these subsidies through the end of 2025. Owner-operators in need of health insurance can search the Federal Marketplace to see if they qualify for a subsidy. Be careful when applying for a subsidy to make sure your income levels qualify. Additionally, a goal of the Inflation Reduction Act is to lower some healthcare costs overall. Out-of-pocket drugs will be capped at $4,000 by 2024 and $2,000 by 2025.
For our complete Inflation Reduction Act article: Click Here
Bonus Depreciation
Beginning in 2018, the IRS allowed your business to take an immediate first-year deduction on any asset purchased during the year. This is because any qualified property purchased and placed in service between September 27, 2017, and December 31, 2022, was able to be depreciated by 100% of the cost of the property.
If the tax law doesn’t change, then starting in 2023, the bonus depreciation goes down by an additional 20% each year. This means that in 2023 depreciation will be 80%, 2024 will be 60%, 2025 will be 40%, 2026 will be 20%, and in 2027 there will be no bonus depreciation. The cost of the depreciated piece of property will be recognized as an expense and lower your taxable income.
Student Loan Payment Moratorium Lifted
Beginning September 1, 2023, repayment of student loans resumed. You may be able to deduct $2,500 of student loan interest paid. The deduction is subject to income limitations which have gone up for 2023. For joint filers, the deduction begins to phase out with a modified AGI of $155,000 and reduces to zero at $185,000. For single and head of household filers, the phaseout begins at $75,000 and reduces to zero at $90,000. For those married filing separately, the deduction is not allowed.
Key Changes for Retirement Income
For those in, or approaching, retirement, the age for taking required minimum distributions (RMDs) has increased to 73. RMDs are required for retirement plans like 401(k), 403(b), 457(b), traditional IRAs, SEP, and SIMPLE IRAs. For those who turn 73 in 2023, you must take your first RMD by April 1, 2024. The penalty for failing to take the RMD has decreased from 50% to 25%, and that penalty is decreased to 10% for timely corrections.
1099-K
The 1099-K is likely not going to affect the trucking business per se, but if your spouse has a business or you have a side business you may see one this year. Many platforms such as eBay, Venmo, Zelle, Etsy, to name a few, will potentially be issuing these forms.
The threshold for issuing 1099-Ks has changed from $20,000 and 200 transactions in 2022 and prior years to $600 in 2023 and future years. While the 1099-K should only be issued for business transactions, given the recent change, it is possible you could get one for reimbursing your friend for concert tickets or similar transactions. This can be corrected by contacting the issuer of the 1099-K, or, if all else fails, it can be corrected on the tax return at the time of filing.
The bottom line is that being aware of these changes can potentially save you money on your taxes. Many of these changes could be temporary, so make sure you’re taking advantage of them now while they are available. If you have any questions, feel free to give us a call at (866) 920-2827 or email us at info@atbs.com.
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